I am pleased to present the Defence Home Ownership Assistance Scheme Bill 2008. The measures contained in the bill are consistent with the government’s pre-election commitment to support the Defence Home Ownership Assistance Scheme as announced at the 2007-08 budget.

May I point out, however, that despite its title, this bill is primarily a retention initiative aimed at encouraging serving members to remain in service.

The bill does that by providing subsidy on interest payments on mortgages after four years of full-time service, with increased loan limits after eight years and again after 12 years. For reservists the key periods are eight, 12 and 16 years service.

However, given the generosity of this scheme it should also significantly improve home ownership levels within the ADF which have traditionally been low due to the nature of service. To some extent, therefore, housing policy is also being addressed, even though it is not the central purpose of this bill.

The Defence Home Ownership Assistance Scheme Bill 2008 will provide eligible Australian Defence Force members with access to contemporary and relevant homeownership assistance that reflects the current and future home loan markets.

As such it is a dramatic improvement on the current scheme which is limited to one provider and is capped at $80,000, which has long been inadequate and should have been replaced at least a decade ago. Indeed in the last few years we have seen the current scheme extended twice pending the development of this policy.

The homeownership assistance benefits provided in this bill will be available to all eligible members of the ADF who are serving on or after 1 July 2008. Former ADF members will continue to have access to benefits available to them under the Defence Service Homes Act 1918 and the Defence Force (Home Loans Assistance) Act 1990.

The provisions of this bill, despite their prime focus on the need for urgent new retention measures, should therefore be considered in the broader housing context. Members of the ADF have access to a wide range of housing and accommodation assistance.

This includes generous rental assistance for high quality housing provided by the Defence Housing Authority.

It also includes benefits for the reimbursement of reasonable costs associated with the sale of a house and purchase of a new house on relocation to another base. That is, conveyancing fees, stamp duty, agents’ costs and bank charges.

These are longstanding benefits provided in response to the requirement for ADF members and their families to relocate frequently in order to meet Defence capability requirements. The policy is based on a longstanding acceptance that homeownership assistance is provided to ADF members in response to the additional difficulties that ADF members and their families have in purchasing a home as a result of the nature of their service.

This bill retains many of the eligibility criteria contained within legislation applying to the existing schemes. However, a number of significant enhancements are to be introduced.

The qualifying period for permanent ADF members will be reduced from five years to four years while the eight-year qualifying period for members of the reserve force will be retained.

The bill will provide the means to maintain parity of the assistance with changing housing and home finance markets. The assistance will be based on housing price index data available from the Australian Bureau of Statistics and on home loan interest rates as they vary from time to time.

Further, the interest subsidy, while set for 20 years, will be extended for a maximum of five years more for warlike service over nine months in aggregate, on a pro rata basis to that capped limit.

The deemed interest rate that will apply to the benefit will be capped by regulation under this bill at the time that the new scheme commences. The bill will provide the minister, or his delegate, with the power to determine by legislative instrument variations in the benefit available to ADF members as a result of movement in the relevant market indicators.

I would also like to make special mention of the provisions made for those who are disabled on service or who lose their life. Members who leave the ADF as a result of a compensable condition have the qualifying period waived and are guaranteed subsidy for at least eight years with a loan limit of 40 per cent of the average house price. If they have served for more than eight years, the member receives a subsidy based on their length of service.

The surviving partner of a deceased eligible member can receive the same subsidy for which the member was eligible at the time of their death. In the event that a deceased member is not eligible because service was less than four years, that qualifying period is waived and the widow is entitled to the minimum 40 per cent for eight years—where the death was compensable.

This bill also provides ADF members with flexibility and choice in regard to housing finance. Rather than one sole supplier as is currently the case with the NAB, ADF members will have access to a panel of three home loan providers selected through a competitive tender process and the full range of home loans provided by each of the selected loan providers.

The three selected providers are the National Australia Bank, the Australian Defence Credit Union and the Defence Force Credit Union. Further, the products on offer are required to be equal or better than other products in the market.

I should also mention that to assist in the funding of the interest subsidy, a fee is payable to consolidated revenue by each of the selected tenderers. That has enabled the subsidy to be more generous than it might otherwise have been, utilising the bargaining power of a considerable bundle of mortgages to a relatively secure class of borrowers.

The bill also provides for the appointment of a scheme administrator who has been selected through a competitive tender process. The scheme administrator will be responsible for the day-to-day operation of the scheme including the determination of ADF member eligibility and entitlement.

The Department of Veterans’ Affairs has been selected by tender as the new scheme administrator. That department replaces the Defence Housing Authority which administers the current scheme on contract, but which was unsuccessful in the tender process.

Subject to the criteria set out in the bill, the Secretary of the Department of Defence may issue subsidy certificates to eligible persons or cancel payment of the assistance. This bill provides the secretary with the power to delegate authority in this regard. ADF members will have the right to seek review of decisions made by a delegate in regard to eligibility for the assistance.

This bill provides a special appropriation to the Department of Defence for the payment of subsidy to eligible persons and for related fringe benefits tax. The 2008-09 budget provided net funding for the scheme of $988.965 million over the period 2008-09 to 2017-18.

Ongoing operation of the scheme as proposed in this bill will be subject to an implementation review after four years with Defence reporting on the outcome of the review within the 2012-13 budget context.

The Defence Home Ownership Assistance Scheme Bill 2008 will provide homeownership assistance to ADF members and their families that is reflective of the contemporary and future housing and finance markets and, in conjunction with other initiatives being introduced, contribute significantly to the recruitment and retention of ADF members.

Due to the complexity of this policy there has been some delay in introducing this legislation, but with an imperative that the new scheme be operational by 1 July.

This has meant that some implementation processes have been fast-tracked, in particular the finalisation of agreements with the three loan providers selected after an open market tendering competition.

It has been necessary to sign deeds of agreement with each of those providers in advance of this legislation being passed and proclaimed—but subject to both those events.

To that end may I express my appreciation to the opposition spokesman, the member for Paterson, for acknowledging that necessity.

Finally, can I also welcome this new policy for those in the ADF wanting to buy their own home. They have been waiting a long time and I am very pleased to be able to deliver it on behalf of the Rudd Labor government.